Expenditures and Activities of
Republic of South Korea
Korea operates three programs to expand and promote exports of agricultural products. One is direct participation in international food shows and assisting Korean agricultural exporters in attending those shows. Expenditures for this program for 1998 are estimated at $2.2 million. The second program is a credit subsidy program, which is not included in the table of this report. The third is an incentive program for swine farmers who raised swine that met export grade standards. The Agricultural and Fishery Marketing Corporation (AFMC), a quasi-governmental agency, carries out agricultural export promotion activities.
Korean Promotion Activity
In 1998, AFMC participated in 12 worldwide food exhibitions including Green Week Germany, Foodex in Japan, the Food Marketing Institute show in the U.S., SIAL in France, Food Expo in Hong Kong, Fine Food in Australia, F & H Asia in Singapore, FISPAL in Brazil and F & H in China. AFMC provided Korean exhibitors with free booths and free airline tickets in order to recruit exhibitors during Korea’s economic crisis. Korean exhibitors paid hotel and meal charges. These Korean companies generally exhibited traditional Korean foods and generally targeted expatriots. In 1998, a total of 399 companies participated in 12 major food shows under Korean pavilions organized and sponsored by AFMC. They made export contracts worth $177 million. FAS estimates the total expenses at about $2.2 million in 1998.
In 1998, the Korea government provided credits of about $272 million, at an interest rate of 5 percent per annum to its exporters. The standard commercial rate was over 10 percent. There were two types of credits. One was used to purchase raw agricultural products such as chestnuts, mushrooms, apples, pears, ginseng, and other products, and the other was used to set up storage facilities for agricultural products. More than 90 percent of the agricultural products purchased with these credits were exported to Japan. The remaining went mainly to other Asian countries.
The Korean government also operated an incentive program for swine farms that slaughtered castrated swine weighing 105-120 kilograms (live weight basis) and an exportable grade of A or B. Almost all swine carcasses of grades A or B were exported to Japan. Swine carcasses that were graded C and below were not eligible. These farmers were paid an incentive of about $5.00 for grade A and about $3.60 for grade B per head. The total incentives budgeted for this program in 1998 was about $5.7 million.
As a major importer, Korea attracts most of the major agricultural producing countries. Australia spent about $2.45 million on promotional and marketing activities, followed by Canada with about $2.2 million, and the European Union, mainly France, about $500,000.
A dozen countries compete with the United States for Korea’s agricultural market. Virtually all agricultural, fishery, and forestry products were promoted by one or more competitors. All these competing countries are expected to maintain or increase their current level of funding for market development and promotional activities.
China, Australia, Canada and Argentina are the United States’ major grain competitors. The China Cereal and Oil Export & Import Corporation (CEROIL) has an office in Seoul, staffed by three. CEROIL conducts promotional and marketing activities for corn, sorghum, and other grains.
The Canadian Wheat Board in Japan, Canadian International Grains Institute, and its Embassy in Seoul conduct promotional and marketing activities for wheat, feed wheat, oats, barley, barley malt, malting barley, rye and others products by inviting Korean importers and technicians to Canada. It also holds seminars, dispatches sales missions to Korea, and provides trade and technical services.
Australia also has commodity representation in Korea. The Grain Pool-Korea, staffed by four and funded by Australian cooperatives, provides promotional and marketing activities for wheat, feed wheat, barley, malt and lupins in Korea. The Australian Wheat Board (AWB) covers Korea from its Hong Kong office.
Korea imports wood products from about 50 countries. Ten major suppliers account for over 90 percent of total imports. Major competing countries for U.S. softwood products are Canada, New Zealand, Chile, Russia, Brazil, and the European Union. Malaysia, Indonesia and China are the major competitors for U.S. hardwood products.
Competing countries have diverse programs such as public relations and advertisements, information materials, trade shows, seminars, and trade missions to Korea.
For soybeans and products Brazil, Canada, China, Malaysia and India are the main competitors. Korea is totally dependent on imported soybeans to meet its crush needs, importing 1.1 million tons in 1998. The U.S. share in this sector was 97 percent that year, and the remainder was mostly from Brazil. Brazil is the most aggressive promoter to the Korean crushers. Brazilian soybeans have a relatively high protein and oil content of a key selling point.
Major competitors to the United States for beef are Australia, New Zealand, and Canada. Major competitors for pork are the European Union and Canada. Australia, New Zealand, and Canada have been selling meat products through private companies; the Korean offices of their commodity boards have helped increase market share in Korea. Meat and Livestock Australia's (MLA) Korean office strengthens the image of Australian beef, provides post management of sales. It also provides market information to the Australian government.
Korea’s total imports of dairy products decreased significantly to $82.6 million in 1998, off from $133.9 million in 1997. Imports from the United States also decreased to $15.3 million in 1998 from $27.4 million in 1997. This was the result of the economic crisis in Korea. However, imports during the first eight months of 1999 increased to $71.7 million from $54.2 million during the same period of l998. Imports from the United States also increased slightly to $10.8 million from $9.6 million during the same period.
The United States’ major dairy product competitors are Australia, Canada, Denmark, and New Zealand. They promote whey, lactose, cheese, ice cream, yogurt, and milk powder by participating in trade shows, hosting solo food shows, inviting Korean buyers to competitors' countries, holding tastings, and provide trade services.
Canada, New Zealand, and Norway promote fish and seafood in Korea.
New Zealand and Chile compete with the United States in the kiwifruit market. The New Zealand Kiwifruit Marketing Board (NZKMB) recently opened a regional office in Korea with a staff of three. It is very aggressive in promoting kiwifruit. Private companies sell through NZKMB. The board’s activities include in-store promotions, trade shows, POS materials, and invitations to Korean trade teams to New Zealand. It also publishes newsletters, places ads in related magazines, and provides trade services.
Chile started exporting its kiwifruit to Korea. FAS believes Chile will intensify its promotional activities and will increase export volume in the future.
Chile is the United States’ sole competitor for fresh grapes. Their embassy conducts promotional and marketing activities. It also provides promotional funds to traders. It participates in trade shows, and conducts in-store promotions, and simple consumer surveys.